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How Fintech Is Targeting Millennials Using AI And Machine-Learning

Over the last several years, millennials have been upending the consumer market as companies scramble to find the best way to attract the world’s first group of digital natives, a wily lot who thrive on innovation, automation and all of the latest tech gadgets.

As more of these young adults enter the workforce and begin investing in their futures, businesses are quickly realizing they will have to change their approach to appeal to this demographic’s unique set of needs and expectations, which are on course to completely disrupt the status quo. In other words, it can’t just be business as usual with the smartphone generation.

While millennials have been saddled with some unflattering labels in recent years, including "narcissistic," "entitled" and "trophy kids," this tech-savvy bunch has also been hailed for being more progressive and open to new ideas than previous generations.

Millennials value transparency as well as convenience. They essentially demand to have a personalized product or service at their fingertips wherever and whenever they need it, according to research that focuses on how banks can reinvent themselves in the millennial age.

These defining characteristics are what companies need to keep in mind if they want to maintain their competitive edge in this climate of lightning-fast technological change. This has never been truer than for fintech, a field I've watched evolve into being more hands-on, user-friendly and fun, thanks to the advanced automation and AI technologies that have been flooding the IT sphere.

Many fintech companies have seized upon a niche opportunity. They understand that traditional banking and investment avenues are being quickly phased out. In fact, 57% of Americans believe that financial institutions will no longer exist in their present form within the next couple of decades. In fact, a lot of big banks have already deployed mobile apps in an effort to keep up with shifting consumer trends, which are rapidly moving toward the complete digitization of the sector. Fintech is taking this approach a step further by essentially replacing (human) financial advisors with robo-advisors that use big data, machine learning and AI to essentially cherry-pick the best investment opportunities for this new generation of investors.

As the CEO of my own mobile app and web development shop, I’ve worked with quite a few fintech startups over the last decade that understand the importance of targeting the needs of this valuable customer base. I’ve been keeping a keen eye on this sector, pleased to see that the market is filling with investment platforms geared toward my generation.

One of the most promising (and innovative) fintech startups to emerge this year, in my opinion, was Grifin. The app seems in line with the millennial mindset: It allows a user to invest their spare change into companies they love by employing machine learning to create customized stock portfolios based on the individual’s unique interests and preferences. The portfolio automatically adapts to keep up with the user’s changing lifestyle, while also replicating the diversification provided by an S&P 500 exchange-traded fund.

Intrigued, I got in touch with Aaron Froug, the company’s co-founder, to get his take on how fintech is zeroing in on millennials.

“Today’s technology provides a gateway for companies to do some pretty amazing things. As well, traditional banking and investment channels aren’t moving fast enough with the industry. They are falling too far behind and are losing their current user base. By the time they adjust, the needs of millennials will already be taken care of by fintech companies,” Froug told me. “There is so much competition in the market that a good product doesn’t just cut it anymore. Companies have to be consumer-focused and make sure they are building a brand that customers want and can be loyal to.”

A 2015 study found that while 71% of millennials would rather go to the dentist than listen to what banks say, they are on course to control some $7 trillion in liquid assets by 2020 and will account for 46% of all income generated in the U.S. by 2025. These are impressive figures, especially if you consider that this generation has crushing student debt that has forced many to put off things like buying a house or starting a family.

Companies like Upstart see millennials as a strategic market segment that it has been successfully able to target. The consumer-lending platform, founded by ex-Googlers, leverages AI and machine learning to price credit and automate the borrowing process.

Jane Penner, the team’s communications director, told me that credit is really hard to build for millennials, which is why Upstart uses non-conventional variables, like employment and education data, to help young people with short credit histories secure a loan.

“Our loan product is not millennial-specific, but the average age of our borrower is 28 — versus mid-40s for our peers — so it's clear our product serves this age group very well,” Penner explained.

AI, machine learning and customer service anytime, anywhere is where the future is headed. Companies hoping to capitalize on consumers’ changing mindsets, with millennials leading the charge, are going to have to fine-tune their approach or jump off the bandwagon. Those that haven’t started automating their services to appease the younger generation’s demands for transparency, convenience and cool, interactive user interfaces have about another year or two to catch up or risk extinction.